Blockchain, Smart Contracts, and the Construction Supply Chain
In recent years, the construction industry has adopted Six Sigma and Lean methods. Additionally, advanced technologies such as enterprise resource planning systems, building information modeling systems, 3D CAD and the IoT. Yet its productivity is only 33% of that of the manufacturing industry.
One reason for this low productivity is the inherent lack of trust between stakeholders in construction projects. For example, failure to deliver materials on time and subsequent project delays can cost developers hundreds of thousands of dollars.
Fortunately, two technological breakthroughs hold the potential to make the construction supply chain more transparent. This, in turn, could streamline projects, prevent losses and build more trust between stakeholders. These technologies are blockchain and smart contracts.
What Are Blockchain and Smart Contracts?
According to Investopedia, a blockchain is a decentralized ledger of transactions that’s accessible to everyone in the chain. It’s not regulated by any single entity and any changes to a chain are updated in real time across all nodes. For this reason, blockchain is more transparent than regular transactions — plus, it’s resistant to fraud.
A smart contract is linked to a blockchain and self-executes when certain conditions are met. For example, once a selling party receives funds, a shipment of goods is automatically sent out. Smart contracts make transactions completely transparent and trackable.
How Blockchain and Smart Contracts Can Benefit the Construction Supply Chain
Blockchain and smart contracts can benefit the construction supply chain for the simple reason that they eliminate uncertainty and make all transactions completely transparent. With blockchain, contractors and developers can see exactly where goods are in the supply chain, as well as what funds have been paid for those goods. At the same time, smart contracts can ensure that shipments go out as soon as payments have been made. This, in turn, speeds up the delivery process and has a positive impact on the progression of projects.
For contractors who are still wary as to the value of blockchain and smart contracts, it’s important to recognize that they’re already proving useful, both in other sectors and in construction. For example, IBM and Walmart use them in their partnership — plus, Australian construction firm Probuild has partnered with Brickschain to manage its supply chain, according to Coin Central.
While it might take a while for these new technologies to become mainstream, it’s worth looking into them. Because if you’re serious about streamlining your projects, they can help you operate with more confidence and speed — and that can have a positive impact on the amount of business you can do.